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CASE NO.: Appeal (civil)  2687 of 2001

PETITIONER: Commissioner of Central Excise,Mumbai-II

RESPONDENT: M/s Allied Photographics India Ltd.

DATE OF JUDGMENT: 18/03/2004

BENCH: V.N. KHARE, S.B. SINHA & S.H. KAPADIA

JUDGMENT: J U D G M E N T

KAPADIA, J.

       Finding inconsistencies between two decisions of  three-Judge Benches of this Court in the case of Sinkhai  Synthetics and Chemicals Pvt. Ltd. v. Collector of  Central Excise [2002 (143) ELT 17] and Collector of  Central Excise, Chennai v. T.V.S. Suzuki Ltd. [2003  (156) ELT 161] on one hand and the decision of nine- Judge Constitution Bench in Mafatlal Industries Ltd. v.  Union of India [(1997) 5 SCC 536] on the other, a two- Judge Bench of this Court vide order dated 13.11.2003  has referred the following question of law involved in this  civil appeal to a larger Bench and accordingly the matter  has come before this court.

"Whether a claim for refund after final assessment  is governed by Section 11 B of the Central Excise Act  1944?

FACTS:   

New India Industries Ltd. (NIIL) is incorporated  under the Companies Act 1956 and carries on business  of manufacturing photographic printing paper which  became chargeable to excise duty vide tariff item No. 37- C(2) of the Central Excise Act 1944 (hereinafter referred  to as "the Act") with effect from March 1, 1974.  NIIL had  entered into distribution agreement with a firm, Agfa  Gevaert (India) Ltd. (M/s AGIL) for supply of goods.  On  8.5.1974 the Department served show cause notice on  NIIL (Manufacturer) to explain why prices declared by the  company vide letter dated 7.3.1974 should not be  rejected as wholesale cash price and why prices charges  by M/s AGIL to its dealers should not be approved in  terms of section 4(a) of the said Act.  On 13.12.1974 the  Department confirmed the show cause notice and  directed NIIL to pay excise duty on the prices charges by  M/s AGIL to its dealers.  In pursuance of the said order, a  notice of demand dated 3.1.1975 was served on NIIL  demanding excise duty of Rs.99,631/- for the period  1.3.1974 to 20.5.1974 which NIIL paid, Under Protest,  and carried on appeal to the Appellate Collector.  On

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8.1.1976 the said appeal was dismissed.  NIIL moved the  High Court under Article 226 of the Constitution of India  vide Misc. Petition No. 841 of 1976 challenging the order  holding that the liability of NIIL to pay excess duty should  be ascertained by the price charged by M/s AGIL to its  dealers.  The petition was subsequently withdrawn.  On  15.9.1975, NIIL addressed a latter to the Department  submitting a declaration stating that M/s AGIL is not  related to NIIL in terms of section 4(a) of the said Act.  On  1.10.1975, the said section 4 of the Act was amended  and the concept of "related person" was introduced.  On  11.11.1975, NIIL was asked by the Department to pay  excise duty on the price charged by M/s AGIL to its  dealers.  NIIL went in appeal which was dismissed on  21.9.1979.  On 31.10.1984 the Department approved the  ex-factory price of NIIL instead of the price list of M/s  AGIL to its dealers.  Therefore, from 1.11.1984, NIIL  started paying excise duty on the ex-factory price charged  by NIIL to M/s AGIL and not on price charged by M/s  AGIL to its dealers.  ON 11.8.1986, NIIL filed refund  claims for Rs.60,19,238.65 for recovery of excise duty  between the period 1.11.1981 to 31.10.1984.  On  29.9.1986 another refund claim for Rs.42,77,358.59 was  lodged for recovery of excise duty during the period  1.11.1978 to 31.10.1981.  Similarly on 7.4.1987 another  refund claim was lodged for excise duty paid in excess  during the period 1.3.1974 to 31.10.1978 by NIIL  amounting to Rs.22,38,391.72.  These refund claims were  made in view of judgment of this Court in the case of  Union of India & Ors.  v. Bombay Tyre International  Ltd. reported in [AIR 1984 SC 420].  On 7.4.1987, NIIL  made a consolidated refund claim of Rs. 1,25,34,988.97  for the entire period from 1.3.1974 to 31.10.1984. In  respect of these refund claims the Department served a  show cause notice and ultimately the Assistant Collector  granted refund to NIIL only for two months preceding the  lodgment of the claim.  On 13.4.1987, NIIL filed Writ  Petition No. 1336 of 1987 in the High Court challenging  the order of Assistant Collector denying refund except for  two months.  That writ petition came for hearing before  learned Single Judge on 29.8.1988. The learned Judge  held that the action of the Department in collecting duty  not on the sale price of NIIL to M/s AGIL was illegal and,  therefore, NIIL was entitled to refund.  However, since the  question of unjust enrichment was debatable, the learned  Judge referred the question to the Full Bench.  After the  decision of the Full Bench in the case of New India  Industries Ltd. v. Union of India reported in [1990 (46)  ELT 23], the said Writ Petition No.1336/87 was reposted  before the learned Judge on 17.1.1990 when he directed  Union of India to prove that the tax burden has in fact  been shifted to consumers.  Pending further examination,  the Department was directed to deposit  Rs.1,25,34,988.97 in Court.  When the Writ Petition came  for hearing on 22.3.1990, NIIL conceded that it had  passed on the burden to M/s AGIL, the sole-selling  distributors of NIIL.  The learned Judge, however,  directed M/s AGIL to file affidavit stating whether it had  passed on the burden to its dealers or not.  Therefore on  22.3.1990 the refund claims of NIIL were rejected but the  learned Judge went into further enquiry as to whether the  burden had been passed on by M/s AGIL to its dealers  and by judgment dated 14.6.1990 held that Union of India  had failed to prove that M/s AGIL had passed on the  burden to its dealers and accordingly granted refund of

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Rs.1,25,34,988.97 to M/s AGIL.  Being aggrieved, the  Department carried the matter in appeal to the Division  Bench which took the view that since NIIL had conceded  of having passed on the tax burden to M/s AGIL there  was no question of the trial court further examining the  question as to whether M/s AGIL had passed on the  burden to its dealers.  Accordingly, the Division Bench  allowed the appeal filed by the Department vide judgment  dated 2.3.1993.  Being aggrieved, NIIL came to this Court  vide SLP No. 7484 of 1993.  By order dated 30.1.1997,  this Court disposed of the SLP observing that since NIIL  had passed on the burden of excise duty to M/s AGIL the  refund claims filed by NIIL are liable to be rejected.   Accordingly, the said SLP was dismissed.  However it  was clarified that the said Order will not prevent M/s AGIL  from adopting appropriate remedy as open to it in law.  In  view of the order dated 30.1.1997 passed by this Court,  M/s AGIL filed Writ Petition No. 1776 of 1993 in the High  Court contending that the petitioners (AGIL) were entitled  to refund of Rs.1,25,34,988.97 as sole selling distributors  of NIIL.  That as distributors they (AGIL) were not related  to NIIL. That their transaction was at arms length and  therefore, the Department had erred in collecting excess  excise duty from NIIL on the basis of the prices charged  by M/s AGIL to its dealers.  In the Writ Petition, M/s AGIL  relied on the judgment of this Court in the case of  Bombay Tyre (supra).  By order dated 28.9.1993 passed  by the High Court, the Department was allowed to  withdraw Rs.1,25,34,988.97 with undertaking to bring  back the amount with interest as and when the Court so  directs.  In the meantime on 19.12.1996 this Court  delivered its judgment in Mafatlal’s case (supra) inter alia  giving 60 days’ time to those claimants, who had earlier  adopted legal proceedings claiming refund to move under  section 118 as amended w.e.f. 20.9.1991.  Consequently,  M/s AGIL moved their refund claim before the Department  on 11.2.1997 for Rs.1,25,34,988.97.  On 9.5.1997, a  show cause notice was issued by the Department to M/s  Allied Photographics India Ltd. (formerly known as M/s  AGIL) calling upon them to show cause why  Rs.1,25,34,988.97 should not be transferred to Consumer  Welfare Fund.  By judgment and order dated 31.10.1997  passed by the Assistant Commissioner refund was  granted to M/s Allied Photographics India (P) Ltd. (M/s  APIL).  This order of Assistant Commissioner was  confirmed in appeal by the Commissioner (Appeals) and  the Tribunal vide impugned order dated 13.6.2000 and  the Department was directed to refund Rs.1,25,34,988.97  with interest.  Being aggrieved, the Department has come  to this Court by way of present civil appeal under section  35L(b) of the Act.

ARGUMENTS:

       Mr. A.K. Ganguli, learned senior counsel for the  Department submitted that there was a difference  between provisional assessment under rule 9B and  payment of duty under protest in terms of rule 233B.  In  this connection reliance was placed on the judgment of  this Court in Mafatlal’s case (supra).  He submitted that  under the second proviso to section 11B if duty is paid by  the manufacturer under protest the limitation of six  months was not applicable, however, the purchaser of  duty paid goods, after finalization of assessment of excise  duty payable by the manufacturer, was not entitled to rely

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upon the said proviso.  That in any event in the present  case, M/s APIL (the respondent-herein) had claimed  refund by filing an independent application on 11.2.1997  and therefore it was governed by section 11B(3).  In  support reliance was placed on para 104 of the Mafatlal’s  case.  It was submitted that the abovementioned two  decisions of this Court in the cases of Sinkhai Synthetics  and Chemicals Pvt. Ltd. v. Collector of Central Excise  reported in [2002 (143) ELT 17] and Collector of Central  Excise v. T.V.S. Suzuki Ltd. reported in [2003 (156) ELT  161] run counter to the law laid down by this Court in  Mafatlal’s case and a clarification to that effect was  required in the interest of justice.  Learned counsel next  contended that M/s APIL as the sole distributor of NIIL  had bought the products in the course of trading between  1974 and 1984 and had sold them to its dealers earning  profits between 12.6535% to 21.1333%.  That during the  said period, the purchaser had no right to claim refund  and that M/s APIL became entitled to claim refund only  after 20.9.1991 when section 11B was amended by the  Central Excise and Customs Amendment Act of 1991  when such right was recognized for the first time and,  therefore, there was no reason for M/s APIL not to pass  on the burden to its dealers.  That M/s APIL not only  passed on the burden to its dealers but even admittedly  made profits on its sales.  That the consideration paid by  M/s APIL to NIIL included excise duty and the very fact  that M/s APIL recovered all its expenses and made profits  in all its sales to its dealers itself establishes that  incidence of duty was passed on to the dealers by M/s  APIL in the course of its trading business.  It was further  urged that M/s APIL had never moved any refund claim  prior to 8.6.1990 and that it filed its affidavit on that day in  response to suo-moto notice issued by the High Court in  the Writ Petition filed by NIIL inter alia for refund whereby  for the first time M/s APIL contended that it had not  passed on the burden to its dealers.  In this connection,  M/s APIL asserted that the excess duty component was  negligible amount of 1.62% of its sale price; that it had  earned profits varying from 12.6535% to 21.1333% and  therefore it absorbed the burden of excess duty within its  profit and that it gave a trade discount varying from 2% to  4% to its customers which itself was more than the  burden of additional duty.  However, on behalf of the  Department it was contended that excess duty  component was a part of cost incurred by M/s APIL during  the above period 1974/1984 and there is no reason why  M/s APIL did not recover it from its dealers particularly  when M/s APIL had no right as a purchaser to claim  refund which was recognized only on 20.9.1991 when  section 11B was amended and therefore, M/s APIL was  seeking to unjustly enrich itself by seeking such refund.   Lastly, it was urged that M/s APIL had worked out its sale  prices before the Department in such a way that it has not  passed the burden to its dealers and yet it has earned  profits varying from 12.6535% to 21.1333% which was  contrary to normal conduct of a trader.  In this connection  it was further submitted that M/s APIL did not produce any  material before the Department disclosing how its sale  price were arrived at.             Per contra, Shri S. Ganesh, learned senior counsel  for the respondent \026 M/s APIL submitted that M/s APIL as  the purchaser was entitled to claim refund of the excess  duty as that amount had been passed on by NIIL to M/s

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APIL.  In this connection reliance was placed on  judgments of this Court in the case of Mafatlal (supra)  and in the case of National Winders v. Collector of  Central Excise reported in [2003 (154) ELT 350].   Learned counsel for the respondent contended that in the  present case section 11B was not at all attracted.  In  support he pointed out that during the period 1974 to  1984, the Department insisted on NIIL paying excise duty  on the footing that M/s APIL was related to NIIL.  That the  Department insisted on NIIL paying the additional excise  duty of 1.62% on the footing that M/s APIL was related  person to NIIL.  However in 1984 assessments of NIIL  were finalized in terms of judgment of this Court in the  case of Bombay Tyre (supra) wherein it was held that the  distributor could not be treated as a "related person" and  accordingly the amounts paid by NIIL towards excise duty  during 1974-84 were adjusted and appropriated against  the amounts found payable on the said assessments and  consequently the disputed amount of excess duty of  1.62% paid by NIIL under protest during the above period  became refundable on the finalization of NIIL’s  assessments in 1984.  That neither NIIL nor M/s APIL  ever disputed the said assessments made in 1984 and  M/s APIL had based their refund claim on the said  assessment.  It was submitted that when a provisional  assessment is made under the Act or when excise duty is  paid Under Protest by the appellant, all payments of  excise duty are On Account payments which are to be  adjusted and appropriated only on vacating of the protest  or finalization of assessment.  In this connection, reliance  was placed on rule 9B (5) as it stood prior to its  amendment in 1989 and rule 233B (v) and (vi).  In either  situations, when the assessment is finalized or the protest  is vacated and the account is settled between the  appellant and the Department and the said On Account  payments made by the appellant are adjusted and  appropriated against the assessed amount and if it is  found that any amount is payable by the appellant then it  can be recovered by the Department without issuance of  show cause-cum-demand notice under section 11A.   Correspondingly, if any amount is found to be repayable  by the Department to the appellant on such taking of  accounts, then that amount has to be refunded without  going through section 11B.  In this connection reliance  was placed on the judgment of this Court in the case of  CCE v. National Tobacco Co. of India Ltd. reported in  [AIR 1972 SC 2563].  According to the learned counsel  the same principle was applicable in cases where the  Department has to refund moneys to the appellant on  finalization of the assessment; which principle has been  reiterated vide para 104 of the Mafatlal judgment.   Accordingly it was submitted that the doctrine of unjust  enrichment in section 11B would not apply to the present  case.  Lastly it was urged that the argument of the  Department was based entirely on section 11B (3) which  had no bearing on the basic issue as to whether section  11B(2) was at all applicable particularly when the  appellant was seeking refund of an "On account" payment  made Under Protest or under the Provisional  assessment".  Therefore, the reliance on section 11B(3)  was misplaced.  That in the circumstances, neither  Sinkhai Synthetics nor T.V.S. Suzuki can be said to be  in any way incorrect, much less per incuriam.  On merits,  learned counsel for the respondent submitted that the  question as to whether the burden of duty has been

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passed on to the consumer is to be answered by relying  on one singular test viz. whether the manufacturer has  increased his sale price in order to pass on the disputed  amount and not whether the manufacturer has made  profits or losses.  In this connection, reliance was placed  on judgments of the Appellate Tribunal having been  accepted by the Department that composition of costs  incurred by M/s APIL was not relevant and the only  relevant factor was whether M/s APIL had increased its  sale price to its dealers after it was required to pay the  differential amount of excise duty in the form of the  increased price charged to it by NIIL.  In this connection it  was submitted that M/s APIL did not increase its sale  price after it was required to bear the differential amount  of excise duty of 1.62% in the form of the enhanced  purchase price paid by it to NIIL and on the contrary, far  from enhancing its sale prices, M/s APIL granted  discounts between 2% to 4% on the sale price charged by  it to its dealers and this discount was more than the  disputed differential amount of excise duty which came to  1.62% of the price.   It was submitted that the case of M/s  APIL has been accepted by all the authorities below and  that this Court should not interfere with the concurrent  findings of fact recorded by the authorities below.  In this  connection it was submitted that the said findings were  based on the audited accounts of APIL; certificate of  Chartered Accountant, Sale Invoices of APIL and two  affidavits filed on behalf of APIL.  It was further urged that  in the case of Mafatlal (supra) it has been held that where  the claim for refund relates to the period prior to  20.9.1991, any evidence which reasonably shows that the  disputed duty has not been passed on to the  dealers/customers in the form of increased price would  suffice and the claimant is not required to produce  documents specified in section 12A which has  prospective operation.  Hence, M/s APIL (respondents  herein) had not increased the sale price for recovering the  additional disputed duty burden of 1.62% which was  passed on to it (M/s APIL) by NIIL.  Learned counsel for  the respondent next contended that profits made by it  during the period 1974 to 1984 does not indicate passing  on of the duty burden to its dealers.  It was contended  that profit or loss is not the determinative factor in order to  ascertain whether the disputed additional duty is passed  on by the respondent to its dealers.  In the circumstances,  it was submitted that on the said material and evidence  and having regard to the specific findings the only  possible conclusion was that the respondent, M/s APIL  had not passed on the disputed duty burden to its  dealers/customers.

POINT FOR DETERMINATION:  

       Whether the doctrine of unjust enrichment in section  11B of the Act is applicable to the facts of this case,  having regard to the fact that NIIL (manufacturer) had  paid the differential disputed excise duty Under Protest  from 1.3.1974 to 31.10.1984 when the assessment was  finalized in favour of NIIL in view of the judgment of this  Court in the case of Union of India & Ors. v. Bombay  Tyre International Ltd. reported in [AIR 1984 SC 420]?

FINDINGS:

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The points at issue in this civil appeal are \027  whether refund of duty paid under provisional assessment  is similar to duty paid under protest as both are "On  Account" payments adjustable on finalization of  assessment or vacating of protest?  Secondly, in the  course of such adjustment or vacation of protest, if any  amount is found payable by the Department to the  manufacturer, is it open to the purchaser to contend that  he (the purchaser) has stepped into the shoes of the  manufacturer seeking refund of "on account payment"  and, therefore, he was not bound to comply with section  11B of the said Act.  In this civil appeal, we have to deal  with the law governing refund during the disputed period  from 1974 to 1984.  To resolve the dispute herein, we  quote hereinbelow section 11B of the said Act as also rule  9B of the Central Excise Rules, 1944 as it stood prior to  Central Excise & Customs (Amendment) Act, 40 of  1991:\027 "Section 11B:   Claim for refund of duty.\027 (1) Any person claiming refund of any duty of  excise may make an application for refund of  such duty to the Assistant Collector of Central  Excise before the expiry of six months from  the relevant date:

Provided that the limitation of six months  shall not apply where any duty has been paid  under protest.

Explanation.\027 For the purposes of this  section,\027

(A)     "refund" includes rebate of duty of  excise on excisable goods exported out of  India or on excisable materials used in the  manufacture of goods which are exported out  of India;

(B)     "relevant date" means,\027

(a)     in the case of goods exported out  of India where a refund of excise duty  paid is available in respect of the goods  themselves or, as the case may be, the  excisable materials used in the  manufacture of such goods,\027

(i)     if the goods are exported by  sea or air, the date on which  the ship or the aircraft in  which such goods are  loaded, leaves India, or

(ii)    if the goods are exported by  land, the date on which such  goods pass the frontier, or

(iii)   if the goods are exported by  post, the date of despatch of  goods by the Post Office  concerned to a place outside  India;

(b)     in the case of goods returned for  being remade, refined, reconditioned, or

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subjected to any other similar process,  in any factory, the date of entry into the  factory for the purposes aforesaid;

(c)     in the case of goods to which  banderols are required to be affixed if  removed for home consumption but not  so required which exported outside  India, if returned to a factory after having  been removed from such factory for  export out of India, the date of entry into  the factory;

(d)     in a case where a manufacturer is  required to pay a sum for a certain  period, on the basis of the rate fixed by  the Central Government by notification  in the Official Gazette in full discharge of  his liability for the duty leviable on his  production of certain goods, if after the  manufacturer has made the payment on  the basis of such rate for any period but  before the expiry of that period such rate  is reduced, the date of such reduction;

(e)     in a case where duty of excise is  paid provisionally under this Act or the  rules made thereunder, the date of  adjustment of duty after the final  assessment thereof;

(f)     in any other case, the date of  payment of duty.

(2)     If on receipt of any such  application, the Assistant Collector of Central  Excise is satisfied that the whole or any part of  the duty of excise paid by the applicant should  be refunded to him, he may make an order  accordingly.

(3)     Where as a result of any order  passed in appeal or revision under this Act  refund of any duty of excise becomes due to  any person, the Assistant Collector of Central  Excise may refund the amount to such person  without his having to make any claim in that  behalf.

(4)     Save as otherwise provided by or  under this Act, no claim for refund of any duty  of excise shall be entertained.

(5)     Notwithstanding anything  contained in any other law, the provision of  this section shall also apply to a claim for  refund of any amount collected as duty of  excise made on the ground that the goods in  respect of which such amount was collected  were not excisable or were entitled to  exemption from duty and no court shall have  any jurisdiction in respect of such claim.

Rule 9B:        Provisional assessment of  duty.\027(1)    Notwithstanding anything

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contained in these rules:\027

(a)     where the proper officer is  satisfied that an assessee is  unable to produce any document  or furnish any information  necessary for the assessment of  duty on any excisable goods; or

(b)     where the proper officer deems it  necessary to subject the excisable  goods to any chemical or any  other test for the purpose of  assessment of duty thereon; or

(c)     where an assessee has produced  all the necessary documents and  furnished full information for the  assessment of duty, but the proper  officer deems it necessary to  make further enquiry (including the  inquiry to satisfy himself about the  due observance of the conditions  imposed in respect of the goods  after their removal) for assessing  the duty,

the proper officer may, either on a  written request made by the assessee  or on his own accord, direct that the  duty leviable on such goods shall,  pending the production of such  documents or furnishing of such  information or completion of such test or  enquiry, be assessed provisionally at  such rate or such value (which may not  necessarily be the rate or price declared  by the assessee) as may be indicated  by him, if such assessee executes a  bond in the proper form with such surety  or sufficient security in such amount, or  under such conditions as the proper  officer deems fit, binding himself for  payment of the difference between the  amount of duty as provisionally  assessed and as finally assessed.

(2)     \005

(3)     The Collector may permit the assessee  to enter into a general bond in the proper  Form with such surety or sufficient security in  such amount or under such conditions as the  Collector approves for assessment of any  goods provisionally from time to time:

       Provided that, in the event of death,  insolvency or insufficiency of the surety or  where the amount of the bond is inadequate,  the Collector may, in his discretion, demand a  fresh bond and may, if the security furnished  for a bond is not adequate, demand additional  security.

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(4)     The goods provisionally assessed under  sub-rule (1) may be cleared for home  consumption or export in the same manner as  the goods which are not so assessed.

(5)     When the duty leviable on the goods is  assessed finally in accordance with the  provisions of these rules, the duty  provisionally assessed shall be adjusted  against the duty finally assessed, and if the  duty provisionally assessed falls short of, or is  in excess of the duty finally assessed, the  assessee shall pay the deficiency or be  entitled to a refund, as the case may be."

Before analysing section 11B, it is important to note  that there is a difference between making of refund and  claiming of refund.  Section 11B was inserted in the said  Act w.e.f. 17.11.1980.  Under sub-clause (e) to  explanation B to section 11B(1), where assessment was  made provisionally the relevant date for commencement  of limitation of six months was the date of adjustment of  duty as final assessment.  Entitlement to refund would  thus be known only when duty was finally adjusted.  Sub- clause (e) referred to limitation in cases covered by rule  9B which dealt with duty paid under provisional  assessment.  The said rule started with a non-obstante  clause.  Rule 9B(1)(a) to (c) indicated the circumstances  in which the proper officer would allow provisional  assessment.  Rule 9B(4) dealt with clearance of goods  provisionally assessed whereas rule 9B(5) dealt with  adjustment of provisionally assessed duty against finally  assessed duty.  The said rule 9B was a complete code by  itself.  On compliance with the conditions therein, the  proper officer was duty bound to refund the duty without  requiring the assessee to make a separate refund  application.  The said rule, therefore, provided for making  of refund.  On the other hand, section 11B(1) dealt with  claiming of refund by the person who has paid duty on his  own accord.  In this connection, section 4 of the said Act  is relevant.  In the case of Bombay Tyre (supra) it has  been held that section 3 of the Act refers to levy of duty  whereas section 4 dealt with assessment. Assessment  means determination of the tax liability.  Under the Act,  duty was payable by the manufacturer on his own  account.  Hence, under section 11B(1), such a person  had to claim refund by making an application within six  months from the relevant date except in cases where duty  was paid under protest in terms of the proviso.  However,  even in such cases, the person claiming refund had to  pay the duty under protest in terms of prescribed rules.  A  bare reading of section 11B(1), therefore, shows that it  refers to claim for refund as against making of refund by  the proper officer under rule 9B.  

On 20.9.1991, the above section 11B underwent a  drastic change vide Central Excises and Customs Laws  (Amendment) Act, 40 of 1991 (hereinafter referred to as  "the Amendment Act").  By the Amendment Act, the  concept of unjust enrichment as undeserved profit was  introduced.  We reproduce herein below amended section  11B: \027

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"Section 11B:   Claim for refund of duty.\027 (1) Any person claiming refund of any duty of  excise may make an application for refund of  such duty to the Assistant Collector of Central  Excise before the expiry of six months from  the relevant date in such form and manner as  may be prescribed and the application shall  be accompanied by such documentary or  other evidence (including the documents  referred to in section 12A) as the applicant  may furnish to establish that the amount of  duty of excise in relation to which such refund  is claimed was collected from, or paid by, him  and the incidence of such duty had not been  passed on by him to any other person:

Provided that where an application for  refund has been made before the  commencement of the Central Excises and  Customs Laws (Amendment) Act, 1991, such  application shall be deemed to have been  made under this sub-section as amended by  the said Act and the same shall be dealt with  in accordance with the provisions of sub- section (2) substituted by that Act:  

Provided further that the limitation of six  months shall not apply where any duty has  been paid under protest.

(2)     If, on receipt of any such  application, the Assistant Commissioner of  Central Excise is satisfied that the whole or  any part of the duty of excise paid by the  applicant is refundable, he may make an order  accordingly and the amount so determined  shall be credited to the Fund:

Provided that the amount of duty of  excise as determined by the Assistant  Commissioner of Central Excise under the  foregoing provisions of this sub-section shall,  instead of being credited to the Fund, be paid  to the applicant, if such amount is relatable  to\027

(a)     rebate of duty of excise on  excisable goods exported out of  India or on excisable materials  used in the manufacture of goods  which are exported out of India;

(b)     unspent advance deposits lying in  balance in the applicant’s account  current maintained with the  Commissioner of Central Excise;

(c)     refund of credit of duty paid on  excisable goods used as inputs in  accordance with the rules made,  or any notification issued, under  this Act;

(d)     the duty of excise paid by the  manufacturer, if he had not

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passed on the incidence of such  duty to any other person;

(e)     the duty of excise borne by the  buyer, if he had not passed on the  incidence of such duty to any  other person;

(f)     the duty of excise borne by any  other such class of applicants as  the Central Government may, by  notification in the Official Gazette  specify:

Provided further that no notification  under clause (f) of the first proviso shall be  issued unless in the opinion of the Central  Government the incidence of duty has not  been passed on by the persons concerned to  any other person.

       (3)     Notwithstanding anything to the  contrary contained in any judgment, decree,  order or direction of the Appellate Tribunal or  any Court or in any other provision of this Act  or the rules made thereunder or any other law  for the time being in force, no refund shall be  made except as provided in sub-section (2).

       Explanation.\027 For the purposes of this  section \005

(B)     "relevant date" means\027

(f)     in any other case, the date of  payment of duty."

According to statement of objects and reasons for  enacting the Amendment Act, the Public Accounts  Committee recommended introduction of suitable  legislation to amend the said Act to deny refunds in cases  of unjust enrichment.  Under the amended section 11B(3)  of the said Act, notwithstanding anything to the contrary in  any judgment, decree, order or direction of the appellate  Tribunal or any Court, no refund was to be made except  in accordance with section 11B(2) of the said Act.   Further, there was substitution of sub-clause (e) to  explanation B to section 11B(1) by which the original sub- clause (e) was deleted and substituted by new sub-clause  (e) under which in cases where duty has been passed on  by the manufacturer to the buyer, the relevant date for  computing the period of limitation would commence from  the date of purchase of goods by the buyer.  At this stage,  it is important to note that although sub-clause (e) as it  stood prior to 20.9.1991 dealt with the period of limitation  in cases of refund of duty paid under provisional  assessment, the substantive provision for provisional  assessment of duty was rule 9B.  Therefore, even with  the deletion of old sub-clause (e), rule 9B continued  during the relevant period.  The deletion of sub-clause (e)  and continuation of rule 9B shows that the section 11B  (as amended) applied to claiming of refunds where the  burden was on the applicant to apply within time and  prove that the incidence of duty has not been passed on  whereas rule 9B covered cases of ordering of

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refund/making of refund, where on satisfaction of the  conditions, the concerned officer was duty bound to make  the order of refund and in which case question of  limitation did not arise and, therefore, there was no  requirement on the part of the assessee to apply under  section 11B.  Lastly, rule 9B referred to payment of duty  on provisional basis by the assessee on his own account  and, therefore, in cases where the manufacturer has been  allowed to invoke this rule and refund accrues on  adjustment under rule 9B(5) that refund is on the account  of the manufacturer and not on the account of the buyer.   If one reads section 11B on one hand and rule 9B on the  other hand, both indicate payment by the assessee on his  own account and refund becomes due on that account  alone.   

In the light of what is stated above, we now quote  hereinbelow para 104 of the judgment of this Court in the  case of Mafatlal Industries Ltd. (supra):\027 "104.   Rule 9-B provides for provisional  assessment in situations specified in clauses  (a), (b) and (c) of sub-rule (1).  The goods  provisionally assessed under sub-rule (1) may  be cleared for home consumption or export in  the same manner as the goods which are  finally assessed.  Sub-rule (5) provides that  "when the duty leviable on the goods is  assessed finally in accordance with the  provisions of these Rules, the duty  provisionally assessed shall be adjusted  against the duty finally assessed, and if the  duty provisionally assessed falls short of or is  in excess of the duty finally assessed, the  assessee shall pay the deficiency or be  entitled to a refund, as the case may be".  Any  recoveries or refunds consequent upon the  adjustment under sub-rule (5) of Rule 9-B will  not be governed by Section 11-A or Section  11-B, as the case may be.  However, if the  final orders passed under sub-rule (5) are  appealed against \027 or questioned in a writ  petition or suit, as the case may be, assuming  that such a writ or suit is entertained and is  allowed/decreed\027then any refund claim  arising as a consequence of the decision in  such appeal or such other proceedings, as the  case may be, would be governed by Section  11-B.  It is also made clear that if an  independent refund claim is filed after the final  decision under Rule 9-B(5) reagitating the  issues already decided under Rule 9-B \027  assuming that such a refund claim lies \027 and  is allowed, it would obviously be governed by  Section 11-B.  It follows logically that position  would be the same in the converse situation."

At the outset it may be pointed out that in para 104  there is nothing to suggest that payment of duty under  protest does not attract bar of unjust enrichment.  Para  104 only states that if refund arises upon finalization of  provisional assessment, section 11B will not apply.  

In the present case, reliance was placed by the  respondent M/s APIL on the above para in support of its  contention that payment of duty under protest and

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payment of duty under provisional assessment are both  "on account" payments under the Act.  We do not find any  merit in this argument.  As discussed, there is a basic  difference between duty paid under protest and duty paid  under rule 9B.  The duty paid under protest falls under  section 11B whereas duty paid under provisional  assessment falls under rule 9B.  That section 11B deals  with claim for refund whereas rule 9B deals with making  of refund, in which case the assessee has not to comply  with section 11B.  Therefore, section 11B and rule 9B  operate in different spheres and, consequently, in para  104 of the said judgment, it has been held that in cases  where duty is paid under rule 9B and refund arises on  adjustment under rule 9B(5), then such refund will not be  governed by section 11B.  In the said para, it has been  clarified that if an independent refund claim is made after  adjustment on final assessment under rule 9B(5),  agitating the same issues, then such claim would attract  section 11B.  This is because when the assessee makes  an independent refund claim after final orders under rule  9B(5), such application represents a claim for refund and,  it would not come in the category of making of refund and  therefore, the bar of unjust enrichment would apply.   Hence, there is no merit in the contention of the  respondent M/s APIL that although in this case duty was  paid under protest, there was no difference between such  payment and duty paid under provisional assessment  under the said Act.  This argument was obviously  advanced because unless the two payments are equated  as contended, the respondent M/s APIL was required to  comply with section 11B.  In this matter, duty has been  paid under protest.  It is the case of the respondent M/s  APIL that since such payment was similar to payment  under rule 9B, the respondent M/s APIL was not required  to comply with section 11B.  In the light of the discussion  hereinabove, we hold that the respondent was bound to  comply with section 11B.  Lastly, in any event, the  application dated 11.2.1997 fell in the category of refund  claim being made after finalization of assessment of NIIL  and, therefore, section 11B had to be complied with in  terms of para 104 of the above judgment in the case of  Mafatlal Industries Ltd. (supra).  For above stated  reasons, since there was failure to comply with section  11B, the respondent was not entitled to refund.     

The point which still remains to be decided is \027  whether the respondent herein was entitled to refund  without complying with section 11B of the Act on the  ground that it had stepped into the shoes of NIIL  (manufacturer) which had paid the duty under protest.  It  was argued on behalf of the respondent that NIIL had  paid the excise duty under protest pending final  assessment, which was ultimately decided in favour of  NIIL and since NIIL had sold the product to the  respondent herein, the respondent was entitled to the  benefit of the second proviso to section 11B(1) which inter  alia stated that limitation of six months shall not apply  where duty had been paid under protest.  We do not find  any merit in this argument.  In the case of Bombay Tyre  International Ltd. (supra), it has been held by this Court  that section 3 of the said Act is a charging section  whereas section 4 is a computation section which covers  assessment and collection of excise duty.  That the basis  of assessment under section 4 was the real value of  excisable goods which included manufacturing cost and

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manufacturing profit but excluded selling cost and selling  profit.  That the price charged by the manufacturer for  sale of the goods represented the real value of the goods  for assessment of excise duty.  In the case of Atic  Industries Ltd. v. H. H. Dave, Asstt. Collector of  Central Excise reported in [AIR 1975 SC 960], this Court  has held that the resale price charged by a wholesale  dealer who buys goods from the manufacturer cannot be  included in the real value of excisable goods in terms of  section 4 of the said Act.  Therefore, it is clear that the  basis on which a manufacturer claims refund is different  from the basis on which a buyer claims refund.  The cost  of purchase to the buyer consists of purchase price  including taxes and duties payable on the date of  purchase (other than the refund which is subsequently  recoverable by the buyer from the Department).   Consequently, it is not open to the buyer to include the  refund amount in the cost of purchase on the date when  he buys the goods as the right to refund accrues to him at  a date after completion of the purchase depending upon  his success in the assessment.  Lastly, as stated above,  section 11B dealt with claim for refund of duty.  It did not  deal with making of refund.  Therefore, section 11B(3)  stated that no refund shall be made except in terms of  section 11B(2).  Section 11B(2)(e) conferred a right on  the buyer to claim refund in cases where he proved that  he had not passed on the duty to any other person.  The  entire scheme of section 11B showed the difference  between the rights of a manufacturer to claim refund and  the right of the buyer to claim refund as separate and  distinct.  Moreover, under section 4 of the said Act, every  payment by the manufacturer whether under protest or  under provisional assessment was on his own account.   The accounts of the manufacturer are different from the  accounts of a buyer (distributor).  Consequently, there is  no merit in the argument advanced on behalf of the  respondent that the distributor was entitled to claim refund  of "on account" payment made under protest by the  manufacturer without complying with section 11B of the  Act.

As stated above, para 104 of the judgment in the  case Mafatlal Industries Ltd. (supra) states that if refund  arises upon finalization of provisional assessment, section  11B will not apply.  Para 104 of the said judgment does  not deal with payment under protest.  In the light of what  is stated herein, we may now consider the judgment of  this Court in the case Sinkhai Synthetics & Chemicals  Pvt. Ltd. (supra). In that matter, the assessee was a  manufacturer. The assessee claimed exemption which  was denied by the Department.  The assessee went in  appeal to CEGAT.  Pending appeal, assessee paid excise  duty under protest.  The assessee succeeded before the  CEGAT and claimed refund on 17.1.1991.  Refund was  denied by the Department.  Therefore, it was a case of  payment of duty under protest.  However, in the said  decision, this Court applied para 104 of the judgment of  the Constitution Bench in the case of Mafatlal Industries  Ltd. (supra), which with respect, had no application.  As  stated above, para 104 of the judgment in the case of  Mafatlal Industries Ltd. (supra) dealt with refund  consequent upon finalization of provisional assessment.   Para 104 does not deal with refund of duty paid under  protest.  As stated above, there is a difference under the  Act between payment of duty under protest on one hand

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and refund consequent upon finalization of provisional  assessment on the other hand.  This distinction is missed  out, with respect, by the judgment of this Court in the  case of Mafatlal Industries Ltd. (supra).  We may also  point out that the judgment in the case of Sinkhai  Synthetics & Chemicals Pvt. Ltd. (supra) is based on  the concession made by the counsel appearing on behalf  of the Department.  That judgment is, therefore, per  incuriam.  Learned counsel for the respondent herein  placed reliance on the judgment of this Court in the case  of TVS Suzuki Ltd. (supra).  In that case, application for  refund was filed.  This was on completion of final  assessment.  On 9.7.1996, the Department issued a  show-cause notice as to why the refund claim should not  be rejected for non-compliance of section 11B.  By order  dated 17.7.1996, the refund claim was rejected on the  ground that it was beyond limitation.  On appeal, the  Commissioner (Appeals) observed that the bar of unjust  enrichment was not applicable as the assessee claimed  refund consequent upon final assessment.  He allowed  the refund claim.  CEGAT agreed with the view of  Commissioner (Appeals).  Before this Court, the  Department conceded rightly that in view of para 104 of  the judgment of this Court in Mafatlal Industries Ltd.  (supra), bar of unjust enrichment was not applicable in  cases of refund consequent upon adjustment under rule  9B(5).  The judgment of this Court in the case of TVS  Suzuki Ltd. (supra), therefore, supports the view which  we have taken herein above that refund consequent upon  finalization of provisional assessment did not attract the  bar of unjust enrichment.   

Mr. Ganesh, learned senior counsel appearing on  behalf of the respondent vehemently urged that the issue  arising in the present matter is squarely covered by the  decision of Division Bench of this Court in the case of  National Winder v. Commissioner of Central Excise,  Allahabad [2003 (154) ELT 350] in which it has been  held that if duty is paid by a manufacturer under protest  then limitation of six months will not apply to a claim of  refund by a purchaser.  For the reasons given  hereinabove, we hold that the said judgment is per  incuriam.  At this stage, it is important to note that the  Division Bench judgment [Hon. S.N. Variava & B.P.  Singh, JJ.] in the case of National Winder (supra) was  delivered on 11.3.2003.  However, on 13.11.2003, the  Division Bench [Hon. S.N. Variava & H.K. Sema, JJ.], has  referred the matter as stated above to the larger bench in  the light of conflict which the Division Bench noticed  between the earlier judgments of this Court on one hand  and paragraph 104 of the judgment of the Constitution  Bench of nine-Judges in the case of Mafatlal Industries  Ltd. (supra).  Hence, by this judgment, we have clarified  the position in law.   

Having come to the conclusion that the respondent  was bound to comply with section 11B of the Act and  having come to the conclusion that the refund application  dated 11.2.1997 was time barred in terms of section 11B  of the Act, we are not required to go into the merits of the  claim for refund by the respondent who has alleged that it  has not passed on the burden of duty to its dealers.  Mr.  Ganesh, learned senior counsel however submitted that  this Court should not interfere, under Article 136 of the  Constitution, in view of the concurrent finding of fact given

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by the authorities below that the respondent has not  passed on the incidence of duty to its dealers.  We do not  find any merit in this argument.  In May, 1974, the  Department took the view that price declared by NIIL in its  price list cannot be accepted as assessable value of  excisable goods and price at which their sole distributor  M/s AGIL sold the goods represented the correct price.   Accordingly, on 8.5.1974 show-cause notice was issued  to NIIL as to why the prices submitted by NIIL should not  be rejected and why excise duty should not be collected  from NIIL on the prices at which their distributor M/s AGIL  sold the goods in the market.  By order dated 31.12.1974,  the Department held that the transactions between NIIL  and M/s AGIL (predecessor of the respondent herein)  were not at arms length and accordingly it was ordered  that the prices charged by the distributor M/s AGIL should  be taken as a wholesale cash price under section 4 of the  said Act, as it stood at the relevant time.  However, later  on, in view of the judgment of this Court in the case of  Bombay Tyre International Ltd. (supra) the Department  approved the price list of NIIL vide order dated  31.10.1984 and accepted the ex-factory price of NIIL.  On  the basis of the said order, NIIL claimed refund of  Rs.1,25,34,988.97 on which the Department issued show- cause notice on 23.2.1987 calling upon NIIL to show- cause why the said amount should not be credited to the  Consumer Welfare Account.  NIIL objected.  However,  their objection was rejected.  Thereafter, the litigation took  place as stated above.  Ultimately, vide order dated  31.10.1997, the Assistant Commissioner Central Excise  granted refund, which order was confirmed in appeal by  the Commissioner (Appeals) and by CEGAT.  Hence, the  Department has come by way of the present Civil Appeal.   

On the above facts, the short point which arises for  determination is \027 whether incidence of duty was passed  on by NIIL to its distributor M/s AGIL and whether M/s  AGIL in turn passed on the burden to its dealers.  On the  first point, NIIL conceded in the earlier proceedings before  the High Court that it had passed on the duty burden to its  distributor M/s AGIL. Therefore, the only question which  we are required to decide is \026 whether M/s AGIL in turn  had passed on the duty burden to its dealers as alleged.   In the present case, it was argued on behalf of the  Department before the authorities below that 20% of the  total price paid by M/s AGIL represented the duty  recovered by NIIL as a part of the sale price.  It is  important to note that M/s AGIL was the sole distributor of  NIIL.  Therefore, it is highly improbable for a distributor to  incur cost of purchase which included 20% element of  duty in addition to the purchase price without passing on  the burden to its dealers.  From the record, it appears that  during the disputed period 1974 to 1984, M/s AGIL were  in trading which further supports the above improbability.    In the present case, there is no material placed on record  by M/s AGIL as to how it had accounted for the cost of  purchase in its books and the accounting treatment it  gave to the said item at the time of payment of the  purchase price.  No record as to costing of that item has  been produced.  This material was relevant as in the  present case NIIL conceded that it had passed on the  burden of duty to its distributor M/s AGIL (buyer) and it  was the buyer who claimed refund.  It has been urged on  behalf of the respondent and which argument has been  accepted by the Authorities below that 20% of the total

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price paid by M/s AGIL to NIIL represented total excess  excise duty levied and not the excess duty collected by  NIIL in the form of sale price from its distributor M/s NIIL.   It was argued that excess duty collected by NIIL  represented only 1.62% of the total price.  It was argued  that resale price charged by M/s AGIL to its dealers had  no relevance to excess excise duty paid by M/s AGIL to  NIIL at the time of purchase as the sale price charged by  M/s AGIL to its dealers was based on the prevailing  market price.  We do not find any merit in this argument.   In the present case, the refund claim is made by a buyer  and not by the manufacturer.  The buyer says that he has  not passed on the burden to its dealers.  The buyer has  bought the goods from the manufacturer paying the  purchase price which included cost of purchase plus  taxes and duties on the date of purchase.  In such cases,  cost of purchase to the buyer is a relevant factor. None of  the authorities below have looked into this aspect.  Even  the appellate Tribunal has not gone into this relevant  factor.  It has merely quoted the passages from the order  of the lower authority, whose order was impugned before  it.  Costing of the goods in the hands of the distributor, the  cost element and the treatment given to purchases by the  buyer in his own account were relevant circumstances  which the Authorities below failed to examine.  It was  submitted that cost of purchase was not a relevant factor.   It was submitted on behalf of the respondent that the  resale price charged by the buyer was not a relevant  factor.  It was submitted that since the sale price of the  goods before and after the assessment remained the  same the burden of excess duty was absorbed by the  respondent.  It was submitted that in any event the sale  price of the goods increased much less than the amount  of duty (differential) involved in this case and, therefore,  incidence of duty was not passed on to the consumers.   In this connection, reliance was placed on several  judgments of the Tribunal.  We have gone through these  judgments.  They are not applicable to the facts of this  case.  In the present case, we are concerned with the  distributor buying the products from the manufacturer and  reselling them to its dealers.  Hence, the cost of purchase  is a relevant factor.  The facts of the cases before the  Tribunal deal with sale by manufacturer to the consumer.   They deal with assessees’ invoice bearing a composite  price.  They are the cases which dealt with the claim of  refund by the manufacturer.  They did not deal with claim  of refund by the buyer.  Hence, they have no bearing on  the facts of the present case.   

Before concluding, we may state that uniformity in  price before and after the assessment does not lead to  the inevitable conclusion that incidence of duty has not  been passed on to the buyer as such uniformity may be  due to various factors.  Hence, even on merits, the  respondent has failed to make out a case for refund.   Since relevant factors stated above have not been  examined by the authorities below, we do not find merit in  the contention of the respondent that this Court should  not interfere under Article 136 of the Constitution in view  of the concurrent finding of fact.   

Accordingly, this Civil Appeal stands allowed.  The  judgment and order No.C-II/1748-50/WZB/2000 dated  13.6.2000 in Appeal No.E/3318/99-Mum passed by the  Customs, Excise and Gold (Control) Appellate Tribunal,

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West Regional Bench at Mumbai-II is hereby set aside.   There shall be no order as to costs.